Qualcomm's new CEO says smartphone innovation still strong

Steve Mollenkopf, CEO of Qualcomm, responds to a question during the 2014 Consumer Electronics Show (CES) in Las Vegas, Nevada, January 6, 2014.

Reuters/Steve Marcus

SAN FRANCISCO (Reuters) - Steve Mollenkopf, the new chief executive of Qualcomm, said on Tuesday that the mobile chipmaker is developing technologies that will drive continued demand for smartphones even as others worry that the smartphone market's best days are behind it.

Mollenkopf, 45, who was previously chief operating officer, officially took over as chief executive officer at the company's annual shareholders meeting on Tuesday. He was named in December to replace Paul Jacobs, the son of a Qualcomm co-founder.

"A lot of people talk about the fact that everyone has a smartphone. That's true to some degree in some parts of the world, but the world is a big place and there are a lot more smartphones coming," Mollenkopf told the shareholders meeting.

Qualcomm's shares have underperformed the S&P 500 for the past 12 months as smartphone demand shifts from the United States and other developed countries, where top-tier phones like the iPhone have become ubiquitous, to China, where consumers tend to buy less expensive devices with lower-end displays and other features.

Mollenkopf pointed to wireless connectivity, cameras, sensors and audio as key smartphone technologies Qualcomm is improving and which he said will help drive demand.

"We're working on technologies that emulate how the brain processes information. Ultimately, I think you get to the point where the phone becomes an extension of all of your senses," Mollenkopf said.

After increasing 39 percent last year, smartphone shipments are expected to expand by 19 percent in 2014, and growth is expected to continue to slow, falling to just 6 percent in 2018, according to market research firm IDC.

China's local market is becoming increasingly important for Qualcomm as China Mobile, the world's largest wireless carrier, rolls out an advanced network this year based on technology the U.S. chipmaker effectively dominates.

But Mollenkopf, who joined Qualcomm in 1994 as an engineer and was named chief operating officer in 2011, also faces an antitrust investigation in China that may affect future licensing revenue from smartphones made there.

China's country's competition regulator said in February it suspected Qualcomm of overcharging and abusing its market position.

While most of Qualcomm's revenue comes from chips that allow phones to communicate with carrier networks, most of its profit comes from licensing patents for its CDMA cellphone technology - a component in new fourth-generation mobile phones.

Also on Tuesday, Qualcomm raised its dividend by 20 percent and upped its share repurchase authorization by $5 billion to $7.8 billion.

Shares of Qualcomm rose 3.74 percent to $76.38 following after the company announced its dividend increase.